Ministry has reviewed the existing procedure followed by the companies seeking prior approval of the Central Government for appointment of cost auditor under section 233B (2) of the Companies Act, 1956 vide General Circular No. 15/2011 dated April 11, 2011. In supersession of any earlier order/circular issued in this regard, the revised procedure to be followed by the Companies for appointment of a Cost Auditor shall be as under:
(a) The company required to get its cost audited under section 233(B)1 of the Companies Act, 1956 shall appoint a cost auditor who is a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Work Accountant Act, 1959 and who hold a valid certificate of practice under sub-section (1) of section 6 of the said Act and includes a firm of cost accountants.
(b) The Audit Committee of the Board shall be the first point of reference regarding the appointment of cost auditors.
(c) The Audit Committee shall ensure that the cost auditor is free from any disqualifications as specified under section 233B (5) read with section 224 and sub-section (3) or sub-section (4) of section 226 of the Companies Act, 1956.
(d) While a Cost Auditor shall have the prime responsibility to ensure that he does not violate the limit specified under section 224(1-B) of the Companies Act, 1956, the Audit Committee shall also be responsible for such compliance by the cost auditor.
(e) The Audit Committee shall obtain a certificate from the cost auditor certifying his/its independence and arm’s length relationship with the company.
(f) The Company shall e-file its application with the Central Government on www.mca.gov.in portal, in the prescribed Form-23C within 90 days from the date of commencement of each financial year, along with the prescribed fee and other documents as per existing practice i.e.
(1) Certified copy of Board Resolution proposing appointment of the cost auditor; and (Annexure-I)
(2) Copy of Certificate obtained from the Cost Auditor regarding compliance of section 224(1B) of the Companies Act, 1956.
(g) On filing of application, the same shall be deemed to be approved by the Central Government, unless contrary is heard within 30 days from the date of filing of such application.
(h) If within 30 days from the date of filing of such application, the Central Government directs the company to re-submit the said application with such additional information or explanation, as may be specified in that direction, the period of30 days for deemed approval of the Central Government shall be counted from the date of re-submission by the company.
(i) After the expiry of 30 days, as the case may be, the company shall issue formal letter of appointment to the cost auditor, as approved by the Board.
(j) Within 30 days of receipt of formal letter of appointment from the company, the cost auditor shall inform the Central Government in the prescribed Form-23D, along with a copy of such appointment.
(k) The Company shall disclose full particulars of the cost auditor, along with the due date and actual date of filing of the cost audit report by the cost auditor, in its Annual Report for each financial year.
(l) In those companies where constitution of an “Audit Committee” of the Board is not required by law, the words “Audit Committee” shall stand substituted by the words “Board of Directors”.
The cost auditor has the same powers and duties in relation to the audit of cost accounts, as are provided for statutory auditor under section 227 of the Companies Act, 1956. His remunerations are fixed by the Board of Directors of the Company.
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CS Ajay Mishra
Email: firstname.lastname@example.org and email@example.com